NEW YORK — Yields of short-term U.S.
Treasuries fell from multiyear highs on Friday after a closely
watched employment report showed unemployment rising and job
growth slowing in August, as many on Wall Street had expected.
Nonfarm payrolls increased by 315,000 jobs last month, down
from a surging 526,000 in July, the Labor Department said. The
unemployment rate increased to 3.7% from a pre-pandemic low of
3.5% in July.
Economists polled by Reuters had forecast payrolls
increasing 300,000. Estimates ranged from as low as 75,000 to as
high as 450,000.
The jobs data came a week after Federal Reserve Chair Jerome
Powell said the U.S. economy may face a painful period of slow
economic growth and rising unemployment as the central bank
continues an aggressive pace of interest rate hikes to curtail
inflation, which is running near 40-year highs.
The two-year U.S. Treasury yield, which typically
moves in step with interest rate expectations, was down 11.8
basis points at 3.404% after hitting 15-year highs the day
The yield on 10-year Treasury notes was down 6.6
basis points to 3.199%, one day after hitting two-month intraday
highs, while the yield on the 30-year Treasury bond
was down 2.7 basis points to 3.347%.
“The basic message is the labor market might be starting to
cool and the Fed might not have to move so aggressively,” said
David Page, head of macroeconomic research at Axa Investment
Market participants now expect a 58% probability that the
Fed will raise benchmark rates by 75 basis points at its meeting
on Sept. 21, down from a 75% chance a day ago, according to
CME’s FedWatch tool. Expectations for a 50 basis
points increase are now up to 42% from 25% on Thursday.
The gains in the job market in August will likely keep the
Fed on its current path, said Rick Rieder, chief investment
officer of global fixed income at BlackRock.
“The door is still wide open for the Fed to keep moving, and
we also think this keeps the potential for a 75-bps hike at the
September meeting still on the table,” he said.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at -20.5 basis points.
September 2 Friday 2:49PM New York / 1849 GMT
Price Current Net
Yield % Change
Three-month bills 2.8475 2.9068 -0.047
Six-month bills 3.2525 3.3513 -0.022
Two-year note 99-182/256 3.4017 -0.120
Three-year note 99-32/256 3.4399 -0.109
Five-year note 99-48/256 3.3031 -0.107
Seven-year note 99 3.2864 -0.087
10-year note 96-52/256 3.1988 -0.066
20-year bond 96-136/256 3.6206 -0.029
30-year bond 93-120/256 3.347 -0.027
DOLLAR SWAP SPREADS
Last (bps) Net
U.S. 2-year dollar swap 36.25 1.00
U.S. 3-year dollar swap 14.25 0.50
U.S. 5-year dollar swap 7.25 0.50
U.S. 10-year dollar swap 9.00 0.25
U.S. 30-year dollar swap -29.50 -0.25
(Reporting by David Randall; Editing by Andrea Ricci, Mike
Harrison and Jonathan Oatis)